Sony Terminates $10 Billion Merger with Zee Entertainment in India

Sony has announced that it is terminating its $10 billion merger with Indian rival Zee Entertainment. The merger, which was agreed upon in late 2021, would have created a new streaming giant in India’s entertainment market, allowing both companies to better compete with Disney, Amazon, and Netflix. However, reports suggest that Sony was unhappy with Zee’s performance since the merger was agreed, and the conditions to close the deal were not satisfied.

One of the main stumbling blocks in the merger was Zee’s insistence that its CEO, Punit Goenka, son of founder Subhash Chandra, run the combined entity. Both Goenka and Chandra are currently being investigated by India’s financial markets regulator for alleged fraud, although they deny any wrongdoing. In response to Sony’s termination, Zee has proposed an extension of up to six months to close the deal and has categorically refuted Sony’s claim for a termination fee of $90 million for alleged breaches.

Goenka expressed his disappointment over the collapsed deal, stating that “the deal that I have spent two years envisioning and working towards had fallen through, despite my best and most honest efforts.” He also shared a selfie from a Hindu temple in Ayodhya, suggesting that he sees it as a divine sign.

The collapse of the merger leaves both Sony and Zee more vulnerable in India’s highly competitive entertainment market. It is reported that Reliance (RIL), owned by Asia’s richest person Mukesh Ambani, is currently negotiating a merger with Disney’s India unit. This could further challenge Sony and Zee’s position in the market.

Vivekanand Subbaraman, a media analyst at Ambit Capital, stated that Zee will now have to go back to the drawing board and will be short of capital without Sony’s infusion of $1.3 billion into the merger. He also highlighted that Sony’s streaming service, Sony LIV, has been more successful and a bigger business than Zee’s Zee5.

The announcement of the termination came after the Tokyo market closed, with Sony’s shares up 1.89 percent. Zee’s shares have fallen 13.6 percent over the past month and more than 30 percent in the past two years.

The collapsed merger between Sony and Zee highlights the challenges and uncertainties in India’s entertainment market. As the market continues to grow, competition intensifies, and companies seek to strengthen their positions through mergers and partnerships.